Seventeen metro areas in the much-watched S&P/Case-Shiller Home Price Indexes saw price increases from July to August, according to Standard & Poor's.
Home prices in both the 10-city and 20-city composite indexes and all metro areas except for Cleveland either improved or fell more slowly. Charlotte, N.C., Cleveland and Las Vegas were the only metro areas to see monthly price declines. The 10-city index fell 10.6%, the 20-city index 11.3% from 2008 levels. It capped off about seven months of home prices, beginning in early 2009.
The numbers may not sound great, but they're a great relief from the plummeting prices of 2007.
“Broadly speaking, the rate of annual decline in home price values continues to improve,” David M. Blitzer, chairman of the Index Committee at Standard & Poor's told the press on Tuesday. “While many of the markets remain down versus this time last year, the relative rate of decline has shown some real improvement. California, in particular, has seen some real positive prints in recent months.”
Economists credit lower home prices and low interest rates with drawing buyers into the market. Lenders say the first-time home-buyers' tax credit, a credit of up to $8,000, has helped.
1. Minneapolis, Minn.
Minneapolis home prices improved 3.2%, more than any other metro area in the index. Manufacturers, such as 3M, and high-tech industries are hoping to benefit from the coming recovery. Minneapolis-based U.S. Bancorp is among the healthiest U.S. financial services companies, according to Moody's.
2. San Francisco, Calif.
San Francisco home prices increased 2.8% from July to August this year. Home prices there will drop 8.3% by next June, but will increase 14.3% by 2011. After the area works though its supply of foreclosures, it will be prepared to recover, according to First American Core Logic.
3. Detroit, Mich.
Detroit home prices, which rose 1.9% over the month, may have nowhere to go but up. Home prices fell 22.6% since last year, and are at about 72% of what they were in 2000. It remains the only metro area in the country where home prices are below the 2000 level.
4. Chicago, Ill.
Chicago home prices rose 1.7%, following a 2.7% increase from June to July. Mike Onorato, president of the Illinois Association of Realtors, credits the first-time home-buyer tax credit for motivating buyers and building momentum for a recovery.
5. Phoenix, Ariz.
Phoenix home prices rose 1.6% after a 1.8% increase from June to July. The city was one of the hardest hit in the real estate bubble. Prices have dropped by more than 25% since last year.
6. San Diego, Calif.
San Diego home prices also increased 1.6%, but reported a 2.5% increase in July, and fell about 8.9% since last year. In areas like San Diego, banks have been slowly working through their inventory of foreclosed homes, which often sell at bargain prices and bring down price averages.
7. Los Angeles, Calif.
Los Angeles, which saw home prices rise 1.6%, is in a similar boat. Prices there rose 1.8% from June to July, but are still 12% lower than last year.
8. Washington, D.C.
Washington, D.C., home prices increased 1.4%, and fell almost 8% since last year. The city is somewhat protected by a reliance on government employment.
9. Denver, Colo.
Denver home prices rose 1% over the month. Prices there fell only about 2% since last year and have avoided the real estate bubble that hit East and West Coast states. (We provide top tips on how to help sell your home in a rough market in “Top Tips For First-Time Home Buyers.”)
10. Seattle, Wash.
Seattle home prices rose 0.1% for the month and should gain an average of 3.8% over the next two years, predicts First American Core Logic. The city has a robust economy with employers such as Boeing and Microsoft, and unemployment had remained lower than average. The real estate market suffered less than others, as prices fell 15.2% over the last few years.
The Bottom Line
Despite improvement nearly across the board, it's unclear if the real estate recovery will gain momentum. While some economists believe home prices have hit bottom and are improving, others say price increases are not sustainable because of continuing high unemployment and the demise of the first-time buyer's tax credit, scheduled to end this year. Both factors, Blitzer said, may have a dampening effect on home prices.